Location: Louisville, KY | Metro: Louisville, KY-IN HUD Metro FMR Area
Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)
| Unit Size | Monthly FMR |
|---|---|
| Studio | $880 |
| 1 Bedroom | $950 |
| 2 Bedrooms | $1,150 |
| 3 Bedrooms | $1,470 |
| 4 Bedrooms | $1,690 |
| 5 Bedrooms | $1,960 |
| 6 Bedrooms | $2,195 |
| 7 Bedrooms | $2,371 |
| 8 Bedrooms | $2,490 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,150 | $174,309 | 0.66% | D |
| 3BR | $1,470 | $275,147 | 0.53% | F |
| 4BR | $1,690 | $394,172 | 0.43% | F |
| 5BR | $1,960 | $465,948 | 0.42% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP 47111 (Charlestown, IN) reveals a notable difference between the federal market rent (FMR) and the actual market rent. For a two-bedroom property, the annualized FMR set by HUD for FY 2024 is $14,400, calculated from the monthly rate of $1,200. Meanwhile, the Zillow Observed Rent Index (ZORI) indicates an average market rent of $1,406 per month, which annualizes to $16,872.
To derive the gross yield, we divide these annual rents by the median home value of $302,896. The gross yield based on the FMR is approximately 4.76%, while the gross yield based on the ZORI is around 5.58%. This comparison clearly shows that the market rent provides a higher gross yield for investors.
Given the 13.4% renter density in Charlestown, it's important to note that the number of days on market (DOM) is listed as N/A. This suggests that there might be limited data on rental turnovers, making it difficult to assess how quickly properties can be leased out under the Section 8 program. However, the higher gross yield derived from the ZORI implies that landlords who can secure market rents will see better returns compared to those relying solely on the FMR.
In conclusion, while the FMR offers a stable, government-backed rent, it yields a lower return of 4.76% compared to the 5.58% possible at market rates. Investors should consider the potential challenges in finding tenants willing to pay the higher market rate within the constraints of the Section 8 program, but the data supports a preference for securing market rents where feasible.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-08-31). Demographics from U.S. Census (2024).
About FMR: Fair Market Rent (FMR) is used to determine payment standards for the Section 8 Housing Choice Voucher program, initial renewal rents for some expiring project-based Section 8 contracts, and rent ceilings for HOME Investment Partnerships.